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the Software View: Amazon.com, a river runs through it (Part V)

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Gentle readers, Bezos's executive staff is nearly as eclectic. It is a motley, though whip-smart, band of executives ranging from Microsoft refugees to liberal-arts majors and rock musicians. Ryan Sawyer, for instance, the vice-president for strategic growth, was a Rhodes scholar who studied poetry at Oxford. "They do not care what has been done in the past," says Anne Martin, a principal at BT Alex. Brown Incorporated, who was on Amazon.com's initial public offering road show.

Bezos expects total dedication from the people at Amazon.com, too, where the hours can be grueling. Says Slade: "This is everybody's wife, mother, father, baby, whatever." He routinely ratchets up goals for managers and often plunges into minute details himself. Slade, for instance, recalls bringing a long list of her job goals to Bezos early one morning. He handed her his own list of her goals, saying: "You tell me which list is more important."

Amazon.com continues to give customers the red-carpet treatment. Bezos's vision has always been about taking advantage of a new platform and new tools to change shopping itself. Long before he launched the company, he had dreams of making Amazon.com "broader than books and music" - a point reinforced this past Christmas season by his move into gift sales and by his December move to offer Amazon.com customers goods from other retailers. In the month of December of the year 1998, it introduced GiftClick, which lets customers choose a gift and simply type in the recipient's electronic-mail address - Amazon.com takes care of the rest. The result: Some sixty-four percent of purchases are from repeat customers, and that is rising steadily. For many, Amazon.com is a life-line to literature. Marcia Ellis, an American attorney working in Hong Kong, formerly used to drag home a suitcase full of books when she visited the United States. Now, she orders two books per month on-line. "Most of the people we know here get books from Amazon.com," she says.

Bezos also was one of the first merchants to leverage the Internet's power in unique ways to spread the Amazon.com brand. Early on, he offered other Internet sites the chance to sell books related to their visitors' interests through a link to Amazon.com. Their inducement: a cut of up to fifteen percent of sales. Now, he has 140,000 sites in his Associates Program.

HIGH TECH

Is Amazon.com Incorporated a retailer or a technology company? Chief Executive Officer Bezos's answer: "Yes." And he is right - it is both. But it is technology that has rocketed Amazon.com to the top of the on-line retailing crowd, and Bezos is not coy about that: "In physical retail, the three most important things are location, location, location. At Amazon.com, the three most important things are technology, technology, technology." Bezos aims to keep it that way. Some seventy-five percent of retailers still are not on the Internet, says Kip Wolin, business development director at retail Internet consultant NetTech Group Incorporated. And the fast-changing nature of Internet technology makes it tough to make up lost ground - granting early leaders a big edge. Indeed, Amazon.com was one of the first to take full advantage of the Internet's computing power to let customers search easily for any book in print, read reams of reviews, and have purchases sent whizzing their way with a mouse click from the comfort of home - all things a book store can not do.

Because Amazon.com has been breaking new cyberground, it has had to develop most of its own technology to take orders on-line, co-ordinate distribution, and handle huge volumes of electronic-mail. That has made it as much a software company as a retailer. Says Ann Winblad, a principal at high-technology venture capital firm Hummer Winblad Venture Partners: "Basically, these are information-systems companies, with a little pick, pack, and ship."

The advantages of on-line retailing: The biggest stores carry about 200,000 items. Amazon.com handles 4.7 million titles, twenty-four hours per day, seven days per week, says Chief Information Officer Richard L. Dalzell. Dalzell is testing a digital data storehouse for customer and product information, based upon technology from Red Brick Systems Incorporated, that will be equal in size to more than 100 million novels. The goal: to amass enough detailed information about customers to allow Amazon.com to suggest precisely the products they are likely to want to buy. "The Internet web site is always in scaffolding," says Chief Technology Officer Shel Kaphan. For Amazon.com, it seems, technology will always be a work in progress.

In the end, Amazon.com's success will ride upon maintaining a delightful experience for all of those new customers. Indeed, satisfied Amazon.com customers may well be helping more than most people realize: Analysts say one key to the sky-high stock price, which underwrites so much of its coming opportunity, is that investors can get a personal feel for Amazon.com's prospects by trying it out - something that is tough to do with most technology companies. Says Halsey Minor, Chief Executive Officer of on-line network CNET Incorporated: "His greatest advantage is a lot of people who buy his stock buy his books." Satisfied customers are buying the sky-high stock that is underwriting Amazon.com's expansion plans."

Bayers writes, "If Bezos's vision comes true, here is how you will shop in the year 2020: The vast bulk of store-bought goods - food staples, paper products, cleaning supplies, and the like - you will order electronically. Some physical storefronts will survive, but they will have to offer at least one of two things: entertainment value or immediate convenience. Successful "shoptainers" will be like the Gap, with its environment of music and youth culture, or Nordstrom, with its tinkling pianist and distinctive face-to-face service. They may be even more amplified, with personal service and showmanship turning every shopping trip into a Super Bowl-style destination event. "That experience is what you get when you go to the movie theatres, and why you do not always rent movies, right?" Bezos notes. Convenience specialists will also have contemporary antecedents - the 7-Eleven chain, for example, or Walgreen's, where you can get a quart of milk or NyQuil gel caplets at 10 o' clock p.m. - but these, too, will evolve: open twenty-four hours per day/seven days per week, for example, so that you can take care of the last mile of delivery yourself at any time. The consultants at the Global Business Network even sketch out a scenario where, within a generation or two, roving van vehicles carrying inventories of more popular necessities, such as toilet paper and diapers, may be constantly circling neighborhoods, ready to drop off an order within moments of receiving it. The United States of America will be utterly transformed, Bezos believes, by this bifurcation of shopping and consumer desire into shoptainment and just-in-time components. The urban downtown, which just a few years ago planners and politicians gave up for dead, will continue to renew and thrive, thanks to the inherent entertainment value in the great retail districts like New York City's Times Square or Pine Street or Pioneer Square in Seattle, Washington. Yet within a generation's time, the kitschy and cluttered landscape of today's suburbia will disappear, because the new retail environment will not support "the sort of bad stores that people go to because they do not have any other alternative." "Strip malls," Bezos predicts, "are history."

The Internet will not replace shopping in the physical world, it will re-focus it. As millions more get what they want cheaper, faster, and with a minimum of hassle via the Internet, they will shop in person only because they need it right away ("I will wear this now, thank you very much."), or because they actually enjoy shopping. This is why retailers seeking repeat business are advised more and more to think in terms of how to enhance the customer's overall experience. Of course, the best mall and store designers learned this years ago from Las Vegas and Boston's Quincy Market. If it is not too much of a stretch to imagine the physical malls of tomorrow as variations upon a theme park, what about the shape of the electronic-mall to come? What form will it take? The answer lies within five trends already apparent: zero inventory, end-to-end, virtual or visceral (or physical), personalization, and all-in-one.

To be continued ...

Sincerely,
Mark Kuharich

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